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How acquiring Rovio empowers Sega to grow its IP and global games business
The $776m acquisition of Angry Birds creator Rovio Entertainment will address its current weakness in mobile outside Japan, help it to grow its brands and launch live-service titles globally, and contribute to its cross-media IP strategy.
Rovio will strengthen Sega’s global mobile games offering
The $776m acquisition of Angry Birds creator Rovio Entertainment by Sega Sammy Holdings bears plenty of potential. In the short term, Sega will immediately address its underwhelming mobile games performance outside Japan. Meanwhile, it gains access to Rovio’s mobile development talent, a live-ops technology platform, and expertise in cross-media brand expansion. These aspects of Rovio can empower Sega on its path toward releasing globally successful live service titles based on its recognizable IP.
As part of the acquisition, Sega is set to inherit Rovio’s existing portfolio of mobile titles. This would immediately strengthen the global performance of its mobile games lineup, an area it looks toward in pursuit of future growth.
Currently, Sega struggles to monetize on mobile outside Japan, owing to a lack of globally successful live-service titles. Omdia analysis of Sensor Tower data reveals that the vast majority of Sega’s mobile revenue from the iOS App Store and Google Play Store in 2022 has been attributed to this single territory.
In 2022, $280m of net revenue from Sega’s mobile titles came from Japan, a staggering 92% of its $305m global total for that year (see Figure 1). By contrast, North America and Europe—two regions Sega specifically intends to expand—accounted for just 4% ($12m) and 2% ($7m) of global revenue, respectively.
1. Figure 1: Sega and Rovio mobile title revenue in 2022, select geographies
Source: Omdia, Sensor Tower
While it would be easy to suggest that Sega has failed to monetize effectively outside Japan, the truth is it hasn’t released compelling content that could have formed the basis of a lucrative and engaging global live-service title. Indeed, of the company’s top 20 highest-earning titles for 2022, 14 were either only available in Japan or monetizing a significant portion of their revenue in Japan only. For instance, its top-earning title in 2022, Hatsune Miku: Colorful Stage, earned 94% of its revenue from Japanese users.
Hatsune Miku: Colorful Stage illustrates the issue at hand—while it has been a successful title for Sega, its success is unique to the Japanese market. It is inherently a cross-media title that expands upon a domestically popular IP. Dozens of marketable characters and their musical performances tie in with live music concerts, music CDs and DVDs, an annual Snow Festival in Hokkaido, and a vast array of available merchandise at domestic stores such as Animate.
All these factors certainly improved the stickiness of users with the game and, subsequently, their tendency to spend via its Gacha-style monetization mechanics. But in the case of Hatsune Miku: Colorful Stage, they have not translated well for Sega outside Japan. It is worth noting that the performance of Genshin Impact and Azur Lane outside Asia proves that there is a global opportunity for live-service titles that monetize in a similar way, if the correct strategy is utilized.
With Sega currently lacking meaningful content outside Japan, Rovio’s portfolio of mobile games is immediately valuable to its mobile business. Rovio titles’ performance in key regions outside Japan is significantly stronger than Sega’s.
In fact, in 2022, revenue from Rovio titles in Europe was four times greater than Sega titles, according to Omdia analysis of Sensor Tower data. The difference is even starker in North America, with earnings almost ten times greater than Sega’s across the same year (see Figure 1). This marks a role reversal of sorts with Sega’s own mobile games.
In the short term, Rovio’s titles will add roughly $170m in annual revenue to Sega’s own title performance, significantly boosting its presence and ability to monetize within the largest addressable segment.
Rovio’s talent and technology empower Sega to grow its IP via live-service titles
It is no secret that Rovio has struggled to find success outside Angry Birds. Omdia analysis of Sensor Tower data reveals that Angry Birds titles account for at least 95% of Rovio’s net revenue in 2022.
The more pressing issue is that Rovio’s mobile revenue has stagnated over the past five years. Its revenue has only grown by 10% in the past five years as it struggled to replicate Angry Birds’ success in new IP (see Figure 2).
2. Figure 2: Sega and Rovio net revenue from mobile titles, 2018–22